Annual Report
REAL SILK INVESTMENTS, INCORPORATED
Indianapolis Indiana
Year Ended December 31, 1997
REAL SILK INVESTMENTS, INCORPORATED
____________________
Officers
D. R. Efroymson................President and Treasurer
L. M. Efroymson.........................Vice President
J. D. Efroymson.........................Vice President
M. A. Singer..................Assistant Vice President
J. D. Hagan...................Assistant Vice President
L. A. Cox....................................Secretary
D. A. Link.........................Assistant Secretary
_____________________
Directors
Daniel R. Efroymson Herbert D. Falender
Loralei M. Efroymson Norman C. Kleifgen, Jr.
Terry W. Bowmaster
Mary Ann Stein
Samuel L. Odle
Transfer Agent and Registrar
Registrar & Transfer Company
Cranford, New Jersey
Custodian of Securities
NBD Bank, N. A.
Indianapolis, Indiana
Independent Auditors
KPMG Peat Marwick LLP
Indianapolis, Indiana
_____________________
REAL SILK INVESTMENTS, INCORPORATED
Financial Statements
December 31, 1997
Table of Contents
Page
Independent Auditors' Report 1
Financial Statements:
Statement of Assets and Liabilities 2
Statement of Operations 3
Statements of Changes in Net Assets 4
Supplementary Information - Financial Highlights 5
Notes to Financial Statements 6-11
Additional Information:
Schedule of Investments in Securities 12-17
Independent Auditors' Report
The Stockholders and Board of Directors
Real Silk Investments, Incorporated:
We have audited the accompanying statement of assets and liabilities of Real
Silk Investments, Incorporated, including the schedule of investments in
securities, as of December 31, 1997, and the related statement of operations
for the year then ended, and the statements of changes in net assets for each
of the years in the two-year period ended December 31, 1997, and the
financial highlights for each of the years in the three-year period ended
December 31, 1997. These financial statements and financial highlights are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audit. The financial highlights for the years ended
December 31, 1994 and 1993 were audited by other auditors whose report
thereon, dated January 19, 1995, expressed an unqualified opinion.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Real Silk Investments, Incorporated at December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each
of the years in the two-year period ended December 31, 1997, and the
financial highlights for each of the years in the three-year period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Indianapolis, Indiana
January 22, 1998
REAL SILK INVESTMENTS, INCORPORATED
Statement of Assets and Liabilities
December 31, 1997
Assets
Investments in securities (unaffiliated issuers), at market value:
Money market funds (cost: $539,173) $ 539,173
Common shares (cost: $11,391,543) 113,688,663
U.S. government and agency securities (cost: $5,324,312) 5,497,340
Other bonds and notes (cost: $5,079,973) 5,192,563
Total investments in securities (unaffiliated issuers) 124,917,739
Investments in securities (affiliated issuers), at market value:
Common shares (cost: $147,786) (note 4) 10,350,000
Total investments in securities 135,267,739
Cash 8,447
Accrued interest and dividends receivable 328,201
Other current assets (note 5) 35,711
Office furniture and equipment, less accumulated
depreciation of $59,968 33,421
Total assets $135,673,519
Liabilities
Accounts payable and accrued expenses (note 5) 17,054
Deferred federal income tax payable on net built-in
gains (note 1) 12,973,551
Total liabilities 12,990,605
Net Assets
Equivalent to $744.96 per share based on 164,683 shares of
$5.00 par value common stock outstanding (note 2) 122,682,914
Total liabilities and net assets $ 135,673,519
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Statement of Operations
Year ended December 31, 1997
Investment income:
Dividends, including affiliated issuers of $264,000 (note 4) $ 2,204,554
Interest on securities from unaffiliated issuers 705,614
Total income 2,910,168
Expenses:
Officers' salaries 104,845
Other salaries and wages 49,641
Taxes other than federal income tax 48,318
Legal, auditing and other professional services 48,255
Custodian fees 8,899
Directors' fees 9,200
Office expense and supplies 6,905
Insurance 11,394
Rent (note 8) 52,135
Pension (note 6) 7,808
Depreciation 9,439
Dues and subscriptions 15,379
Computer expense 7,996
Equipment lease 10,017
Sundry 12,782
Total expenses (note 5) 403,013
Net investment income 2,507,155
Net realized gain (loss) on investment securities (unaffiliated issuers):
Proceeds from sales 12,173,396
Cost of securities sold 12,307,356
(133,960)
Capital gain distributions from other investment companies 14,760
(119,200)
Federal income (tax) benefit (note 1) 8,786
Net realized gain (loss) on investments (note 3) (110,414)
Unrealized appreciation in value of investments:
Beginning of year 91,378,918
End of year 112,784,952
21,406,034
(Increase) decrease in deferred federal income tax
payable (note 1) 3,040
Net increase in unrealized appreciation, including an
affiliated issuer's increase of $825,000 (note 4) 21,409,074
Net realized and unrealized gain (loss) on investments 21,298,660
Net increase (decrease) in net assets resulting from operations $23,805,815
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Statements of Changes in Net Assets
Years ended December 31, 1997 and 1996
1997 1996
Net investment income $ 2,507,155 2,562,246
Net realized gain (loss) on investments (110,414) 485,527
Net increase (decrease) in unrealized appreciation 21,409,074 6,109,773
Net increase (decrease) in net assets resulting
from operations 23,805,815 9,157,546
Federal income tax paid on realized gain on behalf of
stockholders, charged to operations (note 1) - 143,365
Cash distributions to stockholders from net investment
income ($15.00 and $15.23 per share,
respectively) (note 1) (2,470,245) (2,508,122)
Deemed distributions to stockholders from net realized
gain on investments (note 1) - (409,613)
Additional paid-in capital (note 1) - 266,248
Increase (decrease) in net assets 21,335,570 6,649,424
Net assets at beginning of year 101,347,344 94,697,920
Net assets at end of year (including undistributed net
investment income of $823,372 and $786,462,
respectively, and undistributed net realized losses
of $110,414 in 1997) $ 122,682,914 101,347,344
See accompanying notes to financial statements.
REAL SILK INVESTMENTS, INCORPORATED
Supplementary Information
Financial Highlights
Year Ended December 31,
1997 1996 1995 1994 1993
Per share data
Investment income $ 17.67 17.85 17.52 16.23 15.37
Less: expenses 2.45 2.29 2.17 1.92 1.68
Net investment income 15.22 15.56 15.35 14.31 13.69
Net realized gain (loss) on
investments (.67) 2.95 (1.27) (.12) (.11)
Net increase (decrease) in unrealized
appreciation 130.00 37.10 71.10 (26.29) 59.77
Net increase (decrease) in net assets
resulting from operations 144.55 55.61 85.18 (12.10) 73.35
Federal income tax paid on realized gain
on behalf of stockholders, charged
to operations (note 1) - .87 - - .10
Cash distributions to stockholders
from net investment
income (note 1) (15.00) (15.23) (15.28) (13.92) (13.15)
Deemed distributions to stockholders
from net realized gains on
investments (note 1) - (2.49) - - (.28)
Additional paid-in capital
(note 1) - 1.62 - - .18
Increase (decrease) in net
assets 129.55 40.38 69.90 (26.02) 60.20
Net asset value per share:
Beginning of year 615.41 575.03 505.13 531.15 470.95
End of year $ 744.96 615.41 575.03 505.13 531.15
Quoted market value per
share, end of year $ 520.00 450.00 420.00 375.00 335.00
Ratios/Supplemental Data
Expenses to average net assets .35% .39% .41% .36% .33%
Net investment income to average
net assets 2.19% 2.67% 2.88% 2.71% 2.72%
Portfolio turnover rate 3.68% 3.35% 2.04% 1.07% 1.28%
Average commission rate(1) $ 0.0700 0.0700
Total return 19.13% 10.89% 16.31% 16.33% 12.47%
Net assets,
end of year $122,682,914 101,347,344 94,697,920 83,186,717 87,471,939
See accompanying notes to financial statements.
Computed by dividing the total amount of commissions paid by the total number
of shares purchased or sold during the period for which there was a commission
charged.
REAL SILK INVESTMENTS, INCORPORATED
Notes to Financial Statements
December 31, 1997
Note 1 - Summary of Significant Accounting Policies
Real Silk Investments, Incorporated (the Company) is registered under the
Investment Company Act of 1940 (as amended) as a closed-end diversified
management investment company. The Company, which primarily invests in
common stock, has no external managers and pays no management fees. The
significant accounting policies of the Company, which are in conformity
with generally accepted accounting principles for closed-end management
investment companies, are described below.
Investments
Investments in securities traded on national securities exchanges or the
NASDAQ National Market are valued at the last reported sales price. Other
securities traded on the over-the-counter market are valued at the closing
bid prices. Bonds and notes are valued on the basis of quotations
furnished by recognized trade sources. Purchases and sales of securities
are recorded as of the trade dates. Costs of securities sold are determined
by specific shares or average shares if specific shares are not available.
Net unrealized gains or losses are determined based on the net change
between the market value and cost of investments held as of the beginning
and end of the fiscal year. The cost bases of investments for federal
income tax purposes are the same as the book values.
Investment Income
Dividend and interest income are recorded on the accrual basis of
accounting. Cash dividends from securities are recorded as income on the
ex-dividend dates. Dividends for which the recipient has the choice to
receive cash or stock are recognized as investment income in the amount
payable in cash. Other noncash dividends are recognized as investment
income at the fair market value of the property received.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
Federal Income Tax
Prior to January 1, 1989, the Company was subject to federal income tax as
a regular ("C") corporation. Beginning January 1, 1989, the Company
qualified and elected to be taxed as a regulated investment company within
the meaning of Section 851 of the Internal Revenue Code and is currently
reporting tax on such basis. As a regulated investment company, the
Company generally does not pay federal income tax at the corporate level
on current earnings which are passed through to its stockholders.
The Tax Reform Act of 1986 gives the United States Treasury Department the
authority, under Section 337(d)(1), to promulgate regulations to assure
that the purposes of certain provisions of that Act (those taxing
appreciated property on the sale or liquidation of a corporation) are not
circumvented by the use of various entities, including regulated
investment companies. In Notice 88-19, the Treasury stated its intention
to issue regulations generally making a C corporation taxable on built-in
gains at the time it converts to a regulated investment company, but
permitting it to elect to be subject to rules similar to those applicable
to a corporation which elects to be taxed as an S corporation. Those
rules impose a tax on the built-in gains of a C corporation which are
recognized during the first ten years following its election to be taxed
as an S corporation. If the intended regulations were adopted as described
in Notice 88-19, the appreciation of the assets of the Company as of
January 1, 1989 (the "built-in gains") would be taxed to the extent these
gains are realized prior to January 1, 1999. To date, no such regulations
have been issued.
Because the authority to promulgate such regulations exists and because
the Treasury Department issued Notice 88-19, the Company has recorded a
deferred tax liability in its financial statements for the potential tax.
If the deferred tax liability did not exist, which will at least occur as
of January 1, 1999, the net asset value of the Company would be increased
by the amount of the deferred tax liability, which amounts to approximately
$78.78 per share at December 31, 1997.
As built-in gains have been realized, the Company has deposited with the
Internal Revenue Service (IRS) amounts representing the potential tax on
the realized built-in gains. However, because no regulations have been
issued, the Company, while continuing to make the deposits, is also
requesting refunds of the amounts deposited to protect the Company's
right to those deposits should regulations not be issued.
The Company has received refunds from the IRS for the amounts deposited
representing the potential tax on realized built-in gains for the tax years
ended December 31, 1992, 1993 and 1996. However, the Company cannot
predict the response of the IRS to the Company's request for refunds
deposited in other years or whether or when such regulations will be issued.
Also, the Company is a personal holding company as defined in Section 542
of the Internal Revenue Code. As a personal holding company, the Company
is subject to a special surtax on any undistributed personal holding
company income. However, the Company distributes all of its personal
holding company income.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes. The character of distributions made
during the year from net investment income or net realized gains (losses),
if any, may differ from the ultimate characterization for federal income
tax purposes.
Distributions to Stockholders
The policy of the Company is to distribute all investment company taxable
income and to retain as much tax-exempt income as possible without
incurring tax at the corporate level and without jeopardizing the Company's
regulated investment company status. All or most of its net realized
long-term capital gains are retained.
As a regulated investment company, the Company may annually elect to treat
retained long-term capital gains as distributed to its stockholders on the
last day of the year. The Company must pay a tax at the highest corporate
rate on the retained gains deemed distributed. The stockholders include
these capital gains in their individual income tax returns and receive a
credit equal to their share of the tax paid by the Company. The difference
between the gains retained by the Company and the tax paid by the Company
on behalf of the stockholders is added by the stockholders to the basis of
their stock.
For the year ended December 31, 1997, the Company realized long-term
capital gains of $98,149, realized long-term capital losses of $217,349,
paid a deposit of the built-in gains tax of $20,930 and received refunds of
the 1993 built-in gains tax deposit of $10,448 and the 1996 built-in gains
tax deposit of $19,268, resulting in a net realized long-term capital loss
of $110,414. The net realized capital loss is available for use until
December 31, 2005.
Note 2 - Net Assets
The Company's net assets at December 31, 1997 were comprised of the
following elements:
Common stock ($5.00 par value) and additional paid-in
capital; 300,000 shares authorized, 164,683 shares
issued and outstanding $ 22,158,555
Accumulated undistributed income:
Undistributed net investment income 823,372
Undistributed net realized gains (losses) (110,414)
Unrealized gains of $112,969,963 and unrealized losses of
$185,011 less deferred federal income tax of $12,973,551 99,811,401
Net assets $ 122,682,914
Note 3 - Investments
Following is a summary of securities sold during the year ended
December 31, 1997:
Proceeds from
Sales and Net Gain
Maturities Cost (Loss)
Money market funds $ 7,474,644 7,474,644 -
Common shares 1,277,442 1,417,826 (140,384)
U.S. government securities 2,990,310 2,998,807 (8,497)
Other bonds and notes 431,000 416,079 14,921
Totals $ 12,173,396 12,307,356 (133,960)
Capital gain distributions from
other investment companies 14,760
(119,200)
Federal income tax:
Built-in gains deposit (20,930)
Refunds of 1993 and 1996 built-in
gains deposits 29,716
Net realized gain (loss) on investments $ (110,414)
The federal income tax is computed at a rate of 35% on the built-in
unrealized gains which existed at January 1, 1989 (the effective date of
the Company's election to be taxed as a regulated investment company-see
note 1) and which were realized during the year ended December 31, 1997.
Net built-in gains realized during the year ended December 31, 1997 were
$59,800. As discussed in note 1, the Company intends to request a refund
from the IRS of the built-in gains tax deposited.
The aggregate cost of securities acquired during the year ended
December 31, 1997 was as follows:
Money market funds $ 7,462,486
Common shares 1,018,438
U.S. government securities -
Other bonds and notes 3,606,587
Total purchases of securities $ 12,087,511
Note 4 - Investment in Affiliated Issuer
The Company is an affiliated company, as defined in Section 2(a)(2) and
2(a)(3) of the Investment Company Act of 1940, with respect to its
investment in Arnold Industries, Inc., a publicly traded company. The
Company and affiliated persons owned more than five percent of the voting
common stock of Arnold Industries, Inc. at December 31, 1997.
Note 5 - Expenses
The Company shares personnel and office facilities with two entities
considered to be related parties as defined by Statement of Financial
Accounting Standards No. 57, "Related Party Disclosures." One of the
related parties is a private partnership of which certain officers and
directors of the Company are partners. The other related party, with
which there are no direct transactions, is a not-for-profit charitable
foundation of which certain officers and directors are also officers and
directors of the Company. Certain costs are allocated among the three
entities based on actual usage or management's estimate of use if actual
usage cannot be determined precisely.
Certain office equipment, primarily computer and telecommunications
equipment, used by the Company is owned by the related private partnership.
The Company annually enters into a one-year operating lease with the
related party. For the year ended December 31, 1997, payments to the
related party under the lease commencing January 1, 1997, totaled $22,780.
However, the lease was subsequently amended due to a revised evaluation of
the fair market value of the leased equipment, in which it was determined
that the lease payments for the year ended December 31, 1997 should have
totaled $10,017. Accordingly, the Company recorded a receivable in the
amount of $12,763 that will be reimbursed to the Company by the related
party. At December 31, 1997, the Company recorded an accrued expense in
the amount of $835 representing the lease payment to be made for the month
of December, 1997, which was subsequently paid to the partnership in
January, 1998. A portion of the lease amount is attributable to certain
equipment purchased by the private partnership related party from a vendor
that may be considered a related party.
The related party partnership purchases office supplies and similar items
used by the Company. On a monthly basis, the Company reimburses the related
party for its allocated share of the office supplies. For the year ended
December 31, 1997, expenses reimbursed to the related party totaled
$24,321. This total includes approximately $888 that was reimbursed to
the private partnership for a vendor that may also be considered a related
party. In addition to these expenses, for the year ended December 31,
1997, the Company incurred other expenses totaling $180 to a vendor that
may be considered a related party. Included in accounts payable at
December 31, 1997, is $835 due to the related party partnership.
Note 6 - Retirement Plan
Effective January 1, 1992, the Company began sponsoring a money purchase
pension plan which covers all employees of the Company who have met certain
service requirements. Annually, the Company must contribute to the Plan
an amount equal to five percent of each participant's compensation. Pension
expense was $7,808 in 1997.
Note 7 - Line of Credit
The Company has an unsecured line of credit for short-term bank borrowings
of up to $5 million, with interest computed at the bank's prime rate. The
line of credit expires on July 1, 1998. At December 31, 1997, the entire
line of credit was unused.
Note 8 - Rent Commitment
In March 1993, the Company entered into a five-year operating lease for
office space. At December 31, 1997, the future minimum rental payments
required by the lease through March 1998 are $13,126.
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1997
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
MONEY MARKET FUNDS (unaffiliated issuers):
Money Market Funds $ 539,173 .40%
Fidelity Cash Reserves Fund 220,724 $ 220,724
Pegasus Money Market Fund 318,449 318,449
Total Money Market Funds $ 539,173 $ 539,173 .40%
COMMON SHARES (unaffiliated issuers):
Sector: Business Services 4,593,410 3.40%
Industry: Information Services
Cognizant Corporation 8,800 392,700
Dun & Bradstreet Corporation 8,800 272,246
Industry: Office Furniture
Miller (Herman), Inc. 72,000 3,928,464
Sector: Consumer Goods 14,656,870 10.84%
Industry: Apparel/Textiles
Guilford Mills, Inc. 19,687 538,932
Russell Corporation 179,200 4,759,910
Industry: Food/Restaurants
ConAgra, Inc. 20,000 662,500
*Consolidated Products, Inc. 46,261 757,528
*Kroger Company, Inc. 216,000 7,938,000
Sector: Diversified 1,857,224 1.37%
Industry: Conglomerate
Hanson, PLC (ADS) 3,634 83,582
TRW, Inc. 32,000 1,708,000
U.S. Industries, Inc. 2,179 65,642
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1997
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Sector: Energy/Natural Resources 12,345,507 9.13%
Industry: Metals/Mining
Energy Group PLC, The (ADS) 3,634 161,938
Newmont Mining Corporation 54,916 1,613,158
Penn Virginia Corporation 80,000 2,360,000
Reynolds Metals Co., Inc. 8,344 500,640
Industry: Oil & Gas
Atlantic Richfield Co., Inc. 32,000 2,564,000
Kerr-McGee Corporation 18,000 1,139,616
Northwest Natural Gas, Inc. 23,400 725,400
Occidental Petroleum Corporation 9,570 280,516
Union Pacific Resources Group, Inc. 29,118 706,112
Industry: Paper
Boise Cascade Corporation 6,666 201,647
Temple-Inland, Inc. 40,000 2,092,480
Sector: Financial 27,734,552 20.50%
Industry: Bank/Thrift
First Chicago NBD Corporation 92,928 7,759,488
*Ocwen Financial Corporation 27,000 686,799
Industry: Insurance
American Financial Group, Inc. 33,902 1,366,657
Chubb Corporation 54,000 4,083,750
CMAC Investment Corporation 8,000 483,000
HSB Group, Inc. (formerly Hartford
Steam Boiler Inspection &
Insurance Company) 186,000 10,264,782
Ohio Casualty Corporation 16,000 714,000
ReliaStar Financial Corporation 42,078 1,733,067
Industry: Mortgage
*First Alliance Corporation 17,250 316,969
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1997
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Industry: Mutual Funds
Scudder Large Company Value Fund
(formerly Scudder Capital Growth
Fund, Inc.) 12,000 326,040
Sector: Industrial 19,980,874 14.77%
Industry: Capital Goods
Cincinnati Milacron, Inc. 36,000 933,732
Manitowoc Co., Inc. 126,000 4,095,000
Industry: Chemicals
Millennium Chemicals, Inc. 2,076 48,786
Sigma-Aldrich Corporation 10,000 397,500
Industry: Environmental Services
Browning-Ferris Industries, Inc. 16,000 592,000
Industry: Steel
Nucor Corporation 288,000 13,913,856
Sector: Medical 9,651,488 7.14%
Industry: Pharmaceutical
Bristol-Myers Squibb Co., Inc. 8,000 757,000
Johnson & Johnson, Inc. 96,000 6,324,000
Lilly (Eli) & Co., Inc. 16,000 1,114,000
Merck & Co., Inc. 9,000 954,000
Mylan Laboratories, Inc. 24,000 502,488
Sector: Technology 5,362,185 3.96%
Industry: Computer Hardware/Software
Hewlett-Packard Corporation 16,000 998,000
*Microsoft Corporation 6,000 775,500
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1997
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
Industry: Electronics
*Adaptec, Inc. 20,000 742,500
*DII Group, Inc. 20,000 545,000
*Marshall Industries 36,000 1,080,000
Motorola, Inc. 7,000 400,309
*Vishay Intertechnology, Inc. 34,839 820,876
Sector: Communications 11,658,136 8.62%
Industry: Entertainment
Time Warner, Inc. 144,000 8,928,000
Industry: Telecommunication
Ameritech Corporation 8,000 644,000
Bell Atlantic Corporation 4,000 364,000
Bell South Corporation 12,000 675,744
GTE Corporation 7,900 412,775
MCI Communications Corporation 14,800 633,617
Sector: Transportation (see also
affiliated issuers) 5,848,417 4.32%
Industry: Automotive
MascoTech, Inc. 96,000 1,764,000
Industry: Railroads
Norfolk Southern Corporation 54,000 1,647,000
Union Pacific Corporation 34,380 2,153,047
Industry: Trucking
Wabash National Corporation 10,000 284,370
Total common shares
(unaffiliated issuers) $ 113,688,663 $113,688,663 84.05%
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1997
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
U.S. GOVERNMENT AND AGENCY SECURITIES
(unaffiliated issuers):
U.S. Treasury Notes 7.875%, 1/15/98 1,000,000 1,000,940
U.S. Treasury Notes 8.250%, 7/15/98 500,000 507,030
Federal Home Loan Mtg. Corp. REMIC,
5.75%, 2006 1,000,000 992,810
Federal Home Loan Mtg. Corp.,
6.55%, 2003 1,000,000 995,000
Federal National Mtg. Assn. Guaranteed
REMIC, 6.75%, 2018 1,000,000 1,005,000
Federal National Mtg. Assn. REMIC,
6.00%, 2015 1,000,000 996,560
Total U.S. Government and Agency
Securities (unaffiliated issuers) $ 5,497,340 $ 5,497,340 4.06%
OTHER BONDS AND NOTES (unaffiliated issuers):
Bank America Corp., sub. debt.,
7.875%, 2002 1,000,000 1,067,130
General Motors Acceptance Corp. Note,
7.125%, 2003 500,000 519,227
Household Finance Corp. Note, 7.625%,
1999 500,000 509,840
Household Finance Corp. Note,
7.25%, 2003 1,000,000 1,037,996
Lincoln National Corp. Note,
7.25%, 2005 1,500,000 1,557,390
Pacific Gas and Electric Co., 6.25%,
2004 500,000 500,980
Total Other Bonds and Notes
(unaffiliated issuers) $ 5,192,563 $ 5,192,563 3.84%
Total investments in securities
(unaffiliated issuers) $124,917,739 $124,917,739 92.35%
REAL SILK INVESTMENTS, INCORPORATED
Schedule of Investments in Securities
December 31, 1997
Principal % of
Amount Total
or Number Industry Investment
Description of Shares Value Totals Portfolio
COMMON SHARES (affiliated issuers):
Sector: Transportation (see also
unaffiliated issuers)
Industry: Trucking
Arnold Industries, Inc. 600,000 10,350,000 10,350,000 7.65%
Total investments in securities
(affiliated issuers) $10,350,000 $10,350,000 7.65%
Total investments in securities $135,267,739 $135,267,739 100.00%
See accompanying notes to financial statements.
